February 1, 2019 – The Debtors notified [Docket No. 261] the Court hearing the Egalet Corporation case that the Debtors’ First Amended Chapter 11 Plan of Reorganization became effective as of January 31, 2019. The Court had previously confirmed the Plan on January 14, 2019 [Docket No. 242]. On October 31, 2018, the Debtors, a specialty pharmaceutical company focused on developing, manufacturing and commercializing “abuse-deterrent” treatments for pain, filed for Chapter 11 protection with the U.S. Bankruptcy Court in the District of Delaware, lead case number 18-12439 listing between 200 and 1,000 creditors; estimated assets of $119,858,000 and estimated liabilities of $159,233,000.

As previously cited from the Disclosure Statement [Docket No. 164], “The overall purpose of the Plan is to restructure the Debtors’ Estates in a manner designed to efficiently maximize recovery to stakeholders. The Debtors have sought to achieve this purpose through the Iroko Acquisition, a debt for equity restructuring of the 5.50% Convertible Notes and 6.50% Convertible Notes, the issuance of the New Secured Notes and the other transactions contemplated by the Plan.”

Impaired Classes

There were two impaired classes which were entitled to vote on the Plan and which together forgave approximately $61m in debt. Classes 3A, 3B, 3C (the “First Lien Secured Notes Claims”) are comprised of holders of the Debtors’ 13% Senior Secured Notes (the “Senior Notes”) who will exchange approximately $81mn of the Senior Notes for pro rata portions of (i) a $50mn position in new senior facility, (ii) $20mn in cash and (iii) 19.38% of the emerged company’s new common stock, providing the debtors with $11mn of debt relief. The greater pain is to be felt by holders of Classes 4A, 4B, 4C (the “Convertible Notes Claims”) who currently hold the Debtors’ 5.50% Convertible Senior Notes due 2020 (the “5.50% Notes”) and 6.50% Convertible Senior Notes due 2024 (the “6.50% Notes,” and together with the 5.50% Notes, the “Convertible Notes”) These classes will see the entirety of their approximately $50mn debt extinguished in exchange for a 31.62% stake in the emerged company.

Voting Results

Each of the voting classes voted to accept the Plan [Docket No. 225]. The voting results were as follows:

Classes 1A, 1B, 1C (“Other Priority Claims”) are unimpaired, deemed to accept and not entitled to vote on the Plan. Expected recovery is 100%.

Classes 2A, 2B, 2C (“Other Secured Claims”) are unimpaired, deemed to accept and not entitled to vote on the Plan. Expected recovery is 100%.

Class 3A, 3B, 3C (“First Lien Secured Notes Claims”) are impaired and entitled to vote on the Plan. The estimated aggregate amount of claims is $80,000,000, plus accrued and unpaid interest with respect thereon in the amount of $1,155,556 and the expected recovery is 91.40%. On the effective date each holder of an Allowed First Lien Secured Notes Claim shall receive its pro rata share of (i) $50 million in aggregate principal amount of the Series A-1 Notes, (ii) the First Lien Note Equity Distribution (i.e. 19.38% of the emerged Debtors’ new common stock, (iii) $20 million in cash (as adjusted) and (iv) cash in an amount equal to the fees and expenses of the First Lien Secured Notes Trustee…provided, however, that if the Debtors elect to consummate the Rights Offering, the shares of new common stock otherwise allocable to [holders] shall be distributed pursuant to the Rights Offering, and the holders of First Lien Secured Notes Claims shall receive $10 million in cash instead of the First Lien Note Equity Distribution.

Classes 4A, 4B, 4C (“Convertible Notes Claims”) are impaired and entitled to vote on the Plan. The estimated aggregate amount of claims is $48,538,000, plus accrued and unpaid interest with respect thereon in the amount of $1,320,272 and the expected recovery is 54.56%. On the effective date, each holder of an Allowed Convertible Notes Claim shall receive its pro rata share of (i) 31.62% of the emerged Debtors’ new common stock and (ii) if the Debtors elect to consummate the Rights Offering and such holder is an Eligible Holder, pro rata rights to participate in the Rights Offering.

Classes 5A, 5B, 5C (“General Unsecured Claims”) are unimpaired, deemed to accept and not entitled to vote on the Plan. Expected recovery is 100%.

Classes 6A, 6B, 6C (“Intercompany Claims”) are unimpaired, deemed to accept and not entitled to vote on the Plan. Expected recovery is 100%.

Classes 7A, 7B, 7C (“Subordinated Claims”) are impaired, deemed to reject and not entitled to vote on the Plan. Expected recovery is 0.00%.

Class 8A (“Existing Equity Interests”) is impaired, deemed to reject and not entitled to vote on the Plan. Expected recovery is 0.00%.

Classes 9B, 9C (“Intercompany Interests”) are unimpaired, deemed to accept and not entitled to vote on the Plan.

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